Purchase tax nixed on dozens of items

Refrigerators, air conditioners, washing machines, batteries to be cheaper.

air conditioning sales 8 (photo credit: Ariel Jerozolimski [file])
air conditioning sales 8
(photo credit: Ariel Jerozolimski [file])
Beginning Monday, the purchase tax on some 100 consumer items - including refrigerators and air conditioners - will be canceled after Prime Minister and Acting Finance Minister Ehud Olmert signed an order to remove the tax late Sunday night. The move is expected to cost the government an estimated NIS 400 million in revenue per year. "The removal of the purchase tax on many consumer products is part of the government's policy to reduce taxes and create an effective tax program with the goal of generating growth," said Olmert when he signed of the order. Included among the products that consumers will no longer have to pay purchase taxes of between 2 percent and 10% are electrical items such as refrigerators, washing machines, air-conditioning units and batteries, as well as cosmetics. The average family will save hundreds of shekels a year, a Finance Ministry spokesman said. Finance Ministry Director-General Yoram Ariav, who had been holding meetings with representatives of the Tax Authority and the State Income Director to work out the details of the plan, said Sunday night that the elimination of the purchase tax on consumer products was expected to bring a number of important and positive changes. "The cancellation of the taxes will be felt in every Israeli home," he said, "particularly among the [economically] weaker population." Ariav added that the new plan would reduce and simplify the amount of work needed to be done by the Tax Authority. According to Finance Ministry officials, the plan will create significant economic growth, as consumers will be encouraged to make more purchases. In its official statement announcing the new tax plan, the Finance Ministry said it would not be removing or reducing the hefty taxes on products such as vehicles, gas, cigarettes and alcohol, as they have, in the words of the ministry, "negative external effects." Taxes are imposed on these products to deter consumers from making such purchases, while the electric products slated for tax removal have been labeled "white," meaning that they do not impact the environment negatively. In addition to translating into savings for consumers, the tax cuts will also move the country closer into the tax range of OECD (Organization for Economic Development Countries) countries, a group to which Israel is attempting to gain admission. In his official response to the cost-cutting move, Bank of Israel spokesman Dr. Yossi Sa'adon said the central bank had been informed of the meetings that Ariav had been holding with the Tax Authority, and felt the tax cuts were "reasonable, and would be good for the Israeli consumer." The slashing of taxes will translate into savings of 2 percent on air-conditioning units, 2%-3% on cosmetics, 5% when buying a land-line telephone and up to 10% when purchasing batteries. "This plan reduces the amount of bureaucracy that needs to be sorted through inside the various government offices, but more importantly," said Olmert, "it gives more free choice to the consumer when deciding to make a purchase."